National Ports Authority Bill: public hearings

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Transport

05 March 2003
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Meeting report

TRANSPORT PORTFOLIO COMMITTEE

TRANSPORT PORTFOLIO COMMITTEE
5 March 2003
NATIONAL PORTS AUTHORITY BILL: PUBLIC HEARINGS


Documents handed out:
Department Memorandum on the National Ports Authority Bill (Appendix 1)
National Ports Authority Bill [B5-2003] (.pdf file)
National Ports Authority of South Africa submission
Business South Africa submission (Appendix 2)
South African Chamber of Commerce submission
SATAWU submission (Appendix 3)

SUMMARY
The National Ports Authority supported the objectives of the Bill, but disagreed with certain parts of it as published. In particular the provisions for the port regulator, the way land alienation and licencing are approached, and the need to bring order to the chaotic situation at Maydon Wharf in Durban harbour. Business South Africa (BSA) and the South African Chamber of Commerce (SACOB) had similar views that were critical of the erratic consultation process, the port regulator's functions and the method of appointing Board members. The South African Transport & Allied Workers Union (SATAWU) was also critical of the consultation process and suggested that the Bill be suspended to ensure proper input via all other processes.

MINUTES
National Ports Authority submission
Mr Siyabongo Gama, CEO of the NPA, expanded on the written submission. He stated that the NPA supported the objectives of the Bill to promote efficiency and performance in the ports. However, they felt that procedurally the Bill should have been a development of the previous White Paper, whereas in fact it had many differences. However, the NPA was generally satisfied with the Bill and aligned itself with the aims of the Bill.

As regards the port regulator, he noted that the Bill envisages a permanent position. The NPA supports the concept of an interim regulator while the NPA was still part of Transnet. The regulator should be disbanded after this. This was consistent with the original concept in the White Paper. The timing of this disbandment should be determined by the shareholding Minister in consultation with Transnet. He felt that the concept of a regulator would increase delays and costs, and other mechanisms existed to control the Authority itself. In their submission the NPA had numerous detailed proposals for the regulator as his functions were described as "broad and imprecise". The relationship between Transnet and the NPA, and the port operations and the NPA, were also not clarified. The regulator's independence and impartiality were not dealt with in the Bill.

Mr Gama pointed out that the concept of the NPA owning land "on behalf of the State" was inconsistent with its position as a State owned enterprise with its own legal personality. In addition the exact extent of the port land handed over by the Act should be specified in the Bill. The NPA should not be restricted only to the ports themselves, but should be able to alienate land, for example, for city offices.

He pointed out that the NPA was against Clause 34 of the Bill, as there was a need to regulate the provision of port services and operations by licencing all providers, including those with existing concessions or agreements. This would cover safety and efficiency as well as health and the environment. Port activities are linked in a chain, and inefficiency in one affects the others. General port inefficiency can then impact the nation's economy as shown by the recent problems in Durban. He considered that a licence is fundamental to all operations in a port and would only be refused to existing operators if they were unable to meet standards. In applying these standards the authority would be guided by the principles of administrative law.

Maydon Wharf was a special problem, which dated back to pre 1909 when the colonial government of Natal faced strong port competition from then Lourenco Marques (Maputo). As an attraction for Durban harbour it established Maydon Wharf with nominal rentals without inflation indexing, and with no lease expiry dates in some cases. In the late 1950, early 1960's, an initiative was made to reduce these concessions by allowing trade offs. 70% of leaseholders were granted authority to sub-let without permission, which made them into mini landlords, and today 10% of the lessee's activities are not port related. This was a waste of valuable port land. Some leases were extended for 50 or 75 years. The opportunity cost lost to the NPA over the years was about R4 billion. Some 30% of leases were granted in perpetuity, while some of the leases are expiring now; others will only expire in 2030. The other problem is that the Group Areas Act prohibited black entrepreneurs in 60% of the leases. This must be dealt with.

Mr Gama stated that the present situation was morally unjustifiable, and the whole area was in need of re-development for modern shipping and to achieve optimum utilisation of port facilities and land to reduce vessel turnaround times. Remodelling was in the public interest also to improve security and the environment. For these reasons the NPA supported Clause 45 of the Bill.

Discussion
With regards to the regulator Mr R Ainslie (ANC) asked how an independent regulator could be achieved and queried whether the Competition Board does not carry out a duplicate function.

Mr J Cronin (ANC) the Chairperson expressed some concern whether the NPA was its own regulator. He also noted that the NPA did not refer to the Transnet submission. Transnet did not want to let the NPA go, as it was a major source of income. He asked what timing was envisaged in the transition to the NPA from Transnet. The regulator was crucial in the transitional arrangements.

Mr G Penfold, a lawyer for the NPA, answered that there were many examples of independent regulators, such as ICASA. He felt the problem was rather that the port regulator was not specified in sufficient detail. The regulator's functions should include competition. It was possible that there would be an overlap with the Competition Board as had occurred in the Nedcor - Standard Bank case, where there was an overlap between the Reserve Bank and the Competition Board.

Mr G Schneemann (ANC) asked why a permanent regulator was a problem for the NPA.

Mr Gama said that as a strategic national asset, the NPA is owned 100% by the state. Greater private participation is required but the infrastructure must remain with the NPA. The NPA is against the concept of regulation for the following reasons:
-Transaction costs are higher.
-A regulator tends to create work for itself.
-Delaying tactics can be used to impede the smooth functioning of a port.
-They cannot find an example internationally of a permanent port regulator.

Mr Ainslie pointed out that the local government presentation had asked for more involvement between cities and their ports. Mr Gama agreed with that viewpoint.

Regarding Maydon Wharf, a Member asked if Clause 45 of the Bill conflicted with Section 25 of the Constitution.

Ms N Mnanda (ANC) was uncomfortable at the NPA pushing people out, and asked about restructuring plans for the area.

Mr Schneemann asked what the 10% non-port activities were.

Ms De Lille (PAC) said the long leases were a disgrace and that five years should be allowed to give black economic empowerment a chance to work.

Mr Penfold replied that Clause 45 was not unconstitutional as property rights were only involved if people are removed. Maydon Wharf is not an expropriation as the land is at all times owned by the NPA. The measures were in the public interest and were not arbitrary. Procedural fairness was required. Section 25 (8) of the Constitution allowed land reform to be done to redress racial discrimination.

Mr Gama pointed out that the 10% of non-port activities need not be carried out at Maydon Wharf. The NPA was prepared to assist those 10% to relocate and would engage and consult on a case-by-case basis.

Mr Cronin asked if "Maydon Wharf" should not be specified. Alternatively should the clause rather be a general one not specifically for Maydon Wharf. Mr Penfold agreed to supply further legal detail to the Committee on the NPA's suggestions.

Business South Africa submission
On behalf of the BSA, Mr Dick Kruger noted that his organisation had a very diverse constituency. He suggested that the South African port infrastructure was among the best in the world, but inadequate capital spending had caused problems. The BSA estimated that spending was 40% less than what was required. For this reason the BSA welcomed the Bill as a solution to these problems. He was critical of the interrupted consultation process. Business was concerned that their concerns may not be addressed properly.

The BSA welcomed the business structure of the NPA where funds from ports would stay in ports, but was concerned that the company would have regulatory powers as well. This seemed to be a throwback to the old charter companies. They were concerned there was no provision for future private shareholding in the NPA.

They were concerned that the transition from Transnet was not covered in sufficient detail especially as regards Transnet's lost assets and income, and the effect on current service providers as regards licencing.

The BSA considered that a regulator was necessary to protect the smaller parties where one party had a monopoly of the assets. The regulator was there to keep the fees reasonable as is done in the case of Eskom for electricity. They felt that a provision should be included to make the NPA liable to the Competition Board.

Mr Kruger agreed to send the Committee an amended copy of their submission incorporating items mentioned in the meeting.

Discussion
A Member of the Public Enterprises Committee asked how consultation should have taken place, how to reduce the layers of red tape, and how the selection of Board members should be done.

Mr Kruger hoped that the present hearings would help with consultation, but time could have been saved with more consultation earlier. The NPA should apply the regulations made by the Minister. The NPA should be a one-stop shop for port users with Memorandums of Understanding (MOU's) with other bodies for OHSA, electricity and so forth. The regulator would be useful as a point of appeal and to monitor pricing.

He suggested that the members of the Board should be two thirds nominations and one third appointments. He proposed the Rand Water Board example; twenty persons are nominated after interviews and twelve are selected by the Minister to sit on the Board.

South African Chamber of Commerce submission
Ms Peggy Drotski and Mr Ken Warren represented SACOB. Ms Drotski stated that SACOB was a member of BSA and therefore supported their submission. The SACOB viewpoint was summarised in the Executive Summary at the start of their submission and she therefore invited questions.

Discussion
A Member of the Public Enterprises Committee asked why the NPA should be exempt from the Companies Act.

Mr Penfold (NPA) replied that the NPA supported this provision, as it is different from a private company being State owned with a regulator and only one shareholder.

Ms Mnanda asked why SACOB considered it necessary to have an independent authority for appeals at Maydon Wharf.

Another Member asked about correcting the Group Areas Act.

Ms Drotski replied that the independent appeal was to prevent too much power being available to the NPA. As regards black economic empowerment, SACOB was strongly committed to it, but considered that with the new legislation under way there was already encouragement for BEE in these areas. They did not want extra red tape. Ms De Lille disagreed with this statement.

A Member queried safety problems on board vessels in ports and was told by SACOB that these are the responsibility of the owners or operators.

South African Transport & Allied Workers Union submission
Mr Randall Howard: General Secretary of SATAWU, noted that SATAWU is the largest and most influential union in the transport sector, operating as part of COSATU, the federal body. COSATU shared the views of SATAWU in this submission.

SATAWU foresaw problems with the NPA under two Ministers - the Minister of Transport and the Minister of Public Enterprises (the shareholding Minister). SATAWU believed that the Minister of Transport was rather the key accountable Minister.

They suggested that in addition to licences and concessions, the NPA be allowed to enter into "other commercial contracts".

Having been involved in the Transnet Restructuring Committee they were concerned that Transnet would lose its financial autonomy if the NPA were removed. To remove the NPA cash cow would reduce the role of Transnet.

Mr Howard stated that COSATU was dissatisfied that it had not been fully consulted in the process of drafting the Bill. The White Paper had been produced and approved by Cabinet but a somewhat different Bill had now appeared before the Committee. They said that this Bill should be suspended to ensure proper input via all the other processes.

Discussion
A Member asked if SATAWU had made these submissions at the White Paper stage.

Mr Howard said that COSATU had only been engaged at the last minute. Mr Cronin (ANC) noted that the Department of Transport admitted that the process had incurred problems. In this case SATAWU had not been given an updated Bill.

The meeting was adjourned.

Appendix 1:
National Department of Transport
PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRANSPORT

Object of the Act

-promote and improve efficiency and performance in the management and operation of ports; and
-strengthen the State's capacity to:-
-to separate operations from the landlord function within ports;

National Ports Authority Bill Chapters

1. Definitions and objects of act
2. Establishment and incorporation of authority
3. Declaration of ports and functions of Authority
4 Board, staff and assets of authority
5 Ports regulator

Chapters

6. Provision of port services and port facilities and use of land
7. Development, environment and closure of ports
8. Commercial aspects
9. Safety aspects
10. Ministerial directions and port regulations
11. General

Definitions


1 Minister" means Minister of Transport or a duly appointed representative
2 Shareholding Minister" means the Minister of Public Enterprises or a duly elected representative

Establishment and incorporation of the Authority

1 Incorporation of authority
2 Authority's memorandum and articles of association
3 Non application of provisions of Companies Act
4 Certain provisions of Companies Act may be declared in applicable to the Authority
5 Authority's financial year
6 Judicial management and liquidation Act

Declaration of Ports and functions of the Authorities

1 Ports under jurisdiction of Authority
2 Functions of authority
3 Aim of Authority
4 Co-operative governance

Board and staff

1 Functions of the chief executive officer
2 Vacation of and removal from office of chief executive officer
3 Acting chief executive officer
4 Appointment and transfer of staff
3 Transfer of ports, land and other rights and obligations to authority
5 State guarantees

Provision of port services and port facilities and use of land

1 Agreements and partnerships in terminal operations and services
2 Licenses regarding port services and facilities
3 Conditions of licence
4 Restriction on transfer of licence
5 Suspension or cancellation of licence
6 Directives affecting licensed operators and other persons
7 Duties of licensed operators

Board and Staff

1 Composition of board
2 Nomination and appointment of members
3 Functions of board
4 Persons disqualified from membership of board
5 Terms of office of members
6 Disclosure of interest by members
7 Meetings of board
8 Delegations and assignment
9 Appointment of chief executive officer

Ports Regulator

1 Establishment of Regulator
2 Functions of Regulator
3 Members of the Regulator
4 Funding of the Regulator
5 Secretariat of the Regulator

Provision of port services and port facilities and use of land

1 Operations existing on commencement of Act
2 Off-shore cargo handling facilities
3 Restructuring and reform in Maydon Wharf Area

Development, Environment And Closure Of Ports

1 construction, development and maintenance of ports
2 Protection of environment
3 closure of port

Safety And Aspects

1 Safety of navigation and shipping in ports
2 Safety on land Within ports
3 Pilotage
4 Liability of pilot
5 Licensing of pilot
6 Lighthouses and other navigational aids

General

1 Port consultative committee
2 Port access
3 Co-operation with authorities
4 Offences
5 Amendment of law
6 Repeal of law and saving
7 Short title and commencement

Commercial Aspects

1 Commercial functions of Authority
2 Authority's Tariff book
3 Fees payable to Authority

Ministerial directions and port regulations


Ministerial directions
Port regulations

Consultation

Public consultation was conducted during 2002 through information sessions held in Durban, Cape Town, East London & Johannesburg The following organisations are among those who participated and submitted inputs:
ASABOSA; Garlicke & Bousfield; Island View
Shipping; NPA; Transnet; NPUF, Govt depts.;
SAPREF;SAPO; Unicorn Lines;
SATAWU WCape) and many other individuals

Appendix 2:
BUSINESS SOUTH AFRICA
PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON TRANSPORT

ON THE NATIONAL PORTS BILL
5 MARCH 2003


D A KRUGER
Introduction

Business South Africa appreciates this opportunity to convey its views on the National Port Authority Bill to the Portfolio Committee on Transport. Because of the diverse nature of the constituency of Business South Africa the comments are of necessity of a broad nature.


South Africa's overall port infrastructure was rated amongst the best in the world. On a continual basis infrastructure has been ranked as an advantage that South Africa could use to attract investment.


Yet if overall the infrastructure was good, a strong perception, supported out by actual events, emerged that inadequate investment in the maintenance of infrastructure in recent years impacted negatively on the cost of doing business in South Africa.


A study, conducted by the Department of Transport, estimated that capital spending on ports, as a percentage of long-term capital requirements, was less than 40% of what it should be. As a consequence the cost of maintenance escalated substantially.


Business supports the view expressed in the Policy Framework for an Accelerated Restructuring of State Owned Assets during 2000 that the goal of restructuring must be the creation of sustainable economic and social benefits. The aim should be competitively priced and accessible infrastructure services that provide opportunities for economic participation to the private sector.


Accordingly the National Ports Authority Bill is welcomed as a first step in creating a world class ports system and its aims are broadly supported.


Consultation

Following consideration of the White Paper on National Commercial Ports Policy draft legislation was issued in 2002. A process of consultation commenced. The draft legislation was, however, withdrawn before the completion of the consultation process. The next event was the introduction of the Bill currently under consideration early in 2003.


While some sectors were intensively involved in the consultation process, consultation with other sectors was insufficient due to the interrupted process. As a result many concerns of the private sector were not addressed adequately.


The National Ports Authority

Business South Africa supports the establishment of the envisaged National Ports Authority Limited as a separate entity. This will limit cross-subsidisation and ensure that funds generated by ports are utilised for port development and the maintenance of port infrastructure. (Section 49)


Business South Africa does, however, has some concerns:

  • The powers of the National Ports Authority as envisaged in the Bill will overlap with the jurisdictions of various other regulatory bodies. This may result in private operators being bogged down in layers of red tape. They may experience difficulty to comply with a plethora of regulations, particularly if some of them are in conflict. Since the envisaged memoranda of agreement will be crucial to port users should involved in their drafting. (Section 13(2))
  • The regulatory powers conferred on the National Ports Authority, not only create an additional tier of regulations, but it is also inappropriate for a company to be endowed with such regulatory powers. This regulatory power should vest in an organ of State, such as a regulator or a Government department under a minister. (Section 59(2))
  • While the provision of opportunities for private sector involvement in port operations is welcomed, it is disappointing that no provision is made for any future private sector shareholding in the National Ports Authority Limited.


The Transition


The transfer of port ownership from Transnet to the envisaged independent National Ports Authority Limited will give rise to financial and regulatory complications. The Bill does not reflect the transitional arrangements required to deal with these in sufficient detail.


Two matters deserve further consideration:

  • Transnet will lose assets and income. Arrangements should be in place to ensure that Transnet is not unduly disadvantaged in the process. If Transnet is damaged substantially Spoornet will also be affected to the detriment of business in general.
  • The transition will also affect current providers of services in ports. Such entities will have to apply for licenses in order to continue to operating their facilities. The envisaged National Ports Authority Limited will only be obliged to grant such license if the applicant is reasonably capable of complying with the terms and conditions of the license which may include "such other terms and conditions as may be necessary." It is, therefore, possible that a license may be refused. Since the right to operate its facility was granted by way of a lease concluded with Transnet Limited, the refusal to grant a license, as permitted in terms of the Bill, will result in the expropriation of rights. (Sections 35, 36(1) and 43)


National Ports Regulator


In view of the substantial assets and powers which will devolve upon the envisaged National Ports Authority Limited in terms of the Bill, the need for the envisaged Ports

Regulator is recognised. The establishment of the envisaged Ports Regulator is accordingly supported.

  • The envisaged Ports Regulator should be required to review the tariff of fees levied by the National Ports Authority against a set of objective criteria to ensure that such fees are justified and not set at unduly high levels. (Section 30)
  • The envisaged arrangement for the selection of the members of the Ports Regulator is unsatisfactory. This body will have more credibility if its members are to be selected from public nominations. (Section 31)

General Issues

  • The Bill assumes that the Competition Commission will have jurisdiction over the envisaged National Ports Authority Limited. It is, however, known that the current National Ports Authority has argued before the Competition Tribunal, that the provisions of the Competition Act, No 89 of 1998 were not applicable to it. The Bill requires an explicit provision that the envisaged National Ports Authority Limited is to be subject to the Competition Act. (Section 30 (1) (g))

An objective of the Bill is "to encourage employee participation in order to motivate management and workers". However, none of the functions of the envisaged National Ports Authority Limited addresses the encouragement of employee participation in any activity. The only part in the Bill that could be construed as promoting employee participation is the provision for organised labour representatives on the envisaged Port Consultative Committee. (Sections 2(b)(ii) and 60(1))

Appendix 2:
Draft Bill
To provide for the establishment of the National Ports Authority
Comment submitted by SATAWU
24th February 2003
Contact person: Jane Barrett, SA Transport and Allied Workers Union,
ph 011-3336127 or 082-8278561 fax 011-3338918 e-mail jane@satawu.org.za
Preamble

  1. 1st Recognising point: What is meant by "ports and harbours are our national heritage"? Surely it would be more appropriate to refer to the strategic nature of ports.
  2. 2nd Recognising point: Satawu would see ports as a "platform for economic growth" rather than and "engine of economic growth". The latter implies that ports in an of themselves create productive value, whereas in our view make production possible, or add value.
  3. 6th Recognising point: We see no need for the words "which can be competitive within a port". The simple point seems to be that there is a need to separate operations from the landlord functions. We accept this separation.

Definitions

We propose that a definition of "superstructure" be added. There is often confusion in terminology between superstructure and infrastructure, so this would help to be clear.

General comment on accountability

We foresee substantial problems around the separate functions of the "Minister" (Transport) and the "Shareholding Minister" (Public Enterprises).

As we read the Bill, the Minister has the following functions:-

-Declare national commercial ports (including new ones) to fall under the NPA

-Make regulations on co-operative agreements between government departments

-Approve NPA tarriffs, levies etc for use of traffic services, land, berths etc (in concurrence with the Minister of Finance)

-Approve NPA fees for granting licences & concessions (in concurrence with the Minister of Finance)

-Approve the appointment of a CEO by the NPA Board of Directors

-Receive half-yearly reports of the activities of the NPA

-Authorise the NPA to "suspend the license of an operator on the occurrence of industrial unrest, strikes, lock-out or other event which gives rise to an emergency" (in consultation with the shareholding minister)

-Set the minimum qualifications required for a person to be licensed as a pilot (on advice from SAMSA)

-Develop and regularly review the ports policy - stakeholder consultation required in this process

-Make port regulations in connection with implementing this Act

-Make regulations for the control and management of the ports and approaches (including defining wharfs, regulating traffic, regulating the use of lights, cleaning the land and waters, etc
-Take steps to establish an Independent Port Regulator

-Take steps to transfer assets to the NPA

-Take steps to achieve management of the ports


The Shareholding Minister has the following functions:-

-Sign the memorandum of association to form the NPA

-Exercise the shareholding rights of government

-Appoint members of the NPA Board of Directors (and remove them)

-Set the date for the first meeting of the NPA Board of Directors

-Approve the short-term business plans and long-term strategic plans ie statement of corporate intent of the NPA (after approval by the Board)

-Receive an annual report from the CEO of the NPA

-Determine which property, rights, liabilities and obligations are to be transferred to the NPA from Transnet (in concurrence with the Minister of Finance)

-Transfer relevant assets of the state to the NPA


Perhaps someone could produce a flow chart to help us make sense of the above! Instinct tells us that the current formulation is unwieldy and unnecessary and that it would make sense for most powers to be vested in the Minister of Transport, not because it matters who has authority, but because it matters that there is one person who takes responsibility in a hands-on way, and to whom the NPA is accountable.


We propose that the portfolio committee looks very closely at the distinctions in functions, and interrogates the drafters of the Bill about the intention of the split. We also suggest that the committee closely compares the formulation in the Bill with the formulation in comparable legislation eg the ACSA Act of 1993 the President designates the shareholding minister of ACSA. Who is the current shareholding minister of ACSA? Is it not the Minster for Transport?


Role of the NPA in relation to entering commercial contracts with operators

Clause 6 (g)(i) makes reference to the role of the NPA in entering into "concession contracts for the provision of port and cargo handling services by qualified and licensed operators"


Clause 10 (1)(e) refers to "fees for granting licenses, concessions for port services"


Clause 12 (2)(g) refers to the NPA's authority to "approves concessions and licenses for the provision of port and cargo handling services by qualified and licenses operators and service providers"


Clause 31 (2) refers to the right of the Authority to enter into "Public, private partnership (PPPs) agreements and concession contracts with viable and qualified and licensed operators for the provision of port and cargo handling services through public and transparent tender processes and negotiations under such terms…."


Clause 32 (1) refers to the power of the NPA to "grant licences and concessions in terms of this Act".


In line with Satawu's critique of the Ports Policy, we are of the view that these clauses confine the NPA to very particular forms of commercial contracts with operators. We propose that wherever the terms "licences and concessions" appears, the words "and/or other commercial contracts" should be added.

Financial autonomy of the NPA

  • Clause 9 (1)(b) says that the NPA will "remain financially autonomous and not require subsidisation from government". Has the financial analysis been done to show that this is feasible from the start? If not, would it not be wise to allow for flexibility in this regard?

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